Tata Consumer Products Ltd announced its December quarter results on Tuesday evening. The company’s performance in Q3 does not look encouraging. The company’s very low margin in the short term is a cause for concern for its investors. This is why stocks have fallen by more than 8% so far since the 52-week all-time high at Rs 635 per share on January 12, 2021. Whereas, in 2020 the company was among the best-performing companies and its stock jumped by 84%.
However, according to Bloomberg data, the valuation of the company is still high and shares of Tata Consumer Products are currently trading at 47 times based on the estimated earnings of FY2022. Investment firm JM Financial Institutional Securities Ltd said the company’s stocks are still expensive on a near-term forecast basis. The firm said that the company’s Q3 results have not been able to impress.
Results like this
Tata Consumer Products Ltd’s revenue collection in the December quarter has been better than expected, but its margins have disappointed. The company’s revenue grew 23% year-on-year. Business conditions were not easy due to the rise in tea leaf prices, which led to a 840 basis point drop in the company’s standalone profit margin. While the company’s consolidated gross margin fell 574 basis points to 37.8%.
In view of this result, experts at investment firm Kotak Institutional Equities have estimated the stock to be down by 3 to 7% on earnings for Tata Consumer Products’ FY2021-23E. However, the company’s EBITDA margin was better in the December quarter. The company has signed an agreement to buy 100% stake in Kottaram Agro Foods, whose brand Soulfull is quite well known. This is expected to give a further expansion to the company’s business.
